PPC pays off R1.2 billion of debt thanks to strong cash generation
JSE-listed cement maker PPC reported a 19% year-on-year improvement in free cash from operations to R1.2 billion for the year ended March 31.
With the net proceeds from the sale of non-core assets, PPC was able to repay R1.2 billion of its debt during the year under review.
Its debt now stands at 1 billion rand.
During the year, PPC sold its PPC Lime and Botswana Aggregates businesses.
CFO Brenda Berlin said in a June 27 statement that the company’s continued efforts to prudently manage cash and debt have placed it in a strong financial position to navigate all economic cycles.
CEO Roland van Wijnen Told Engineering News that the company was focused on resuming dividends as soon as possible, while building efficiency to help ease inflationary pressures.
Unpacking the main negative impacts on the company’s earnings per share (EPS), which amounted to a loss of 5c for the year under review, compared to EPS of 3c in the previous financial year, he explained that PPC Zimbabwe suffered a pre-tax loss. of R67 million and that impairments totaled R38 million.
Pre-tax profit from continuing operations decreased from R1.7 billion to R186 million and, excluding the mentioned non-cash items, operating profit from continuing operations would have decreased by R43 million during the year. year under review.
The group’s tax burden for the reporting year was R207 million.
Cash provided by continuing operations before changes in working capital decreased by 3% to R1.5 billion, while tight working capital management led to an increase in cash provided by continuing operations 6% year-on-year to R1.4 billion.
Regarding PPC Barnet, in the Democratic Republic of Congo, long and binding agreements for the restructuring of the debt of senior lenders were signed on April 19, with all the conditions precedent having been fulfilled on April 29.
“Solvency was restored to PPC Barnet’s balance sheet through the capitalization of quasi-equity and historic deficit financing loans and, after the end of the year, debt restructuring became effective, thus restoring liquidity of the business,” the company explained.
Van Wijnen said cash generation and preservation remains a key performance metric for PPC.
Net cash used in investing activities was reduced to R72 million in the year under review from R392 million in the prior year, mainly due to the receipt of R503 million in cash from the divestment of PPC Lime and Botswana Aggregates offsetting an increase in investment in property, plant and equipment of R186 million.
Net cash inflow before financing activities improved to R973 million in the year under review, which is similar to the prior year’s net cash inflow before financing activities of R972 million.
Total costs, comprising cost of sales plus administration and operating expenses, increased 19% year-on-year to R9.3 billion, driven by an 85% increase in costs of PPC Zimbabwe.
Apart from continued hyperinflation and the 42% depreciation of the Zimbabwean dollar against the rand, the most significant element was an increase in the depreciation charge of PPC Zimbabwe to R386 million, due to the application of the hyperinflating effective depreciation rate method in the current context. year.
Costs, excluding depreciation and PPC Zimbabwe, increased 7% as efficiency gains offset input cost inflation.
Cement sales volumes in the South Africa and Botswana region were in line with the prior year as demand normalized from a high level.
During the year under review, cement sales volumes increased by 5% to 9%.
During the year under review, cement revenues in South Africa and Botswana increased by 4% to R5.4 billion, compared to the previous year, while earnings before interest, taxes , depreciation and amortization decreased by 5% year-on-year to R825 million, mainly due to higher input cost inflation and lower volumes in the second half of the year.
PPC explained that cement sales in the region continued to benefit from demand growth in informal and rural markets, albeit at a normalized pace following the post-Covid-19 lockdown demand spike.
The company remains well positioned to respond to the government’s infrastructure program once it gains momentum, although the company has yet to experience a significant increase in cement sales from this program, except for some road construction activities.
The company noted a 19% increase in cement and clinker imports into South Africa, mostly from Vietnam, which effectively dumps materials into the country at cheap rates.
PPC estimates that imports account for around 10% of South African cement sales, despite local manufacturing capacity being sufficient to meet demand.
PPC works with other parties within the parameters of applicable competition laws to achieve a rapid outcome.
In terms of aggregates, ready-mixed concrete and cinder, PPC said it experienced strong demand for these materials in the first half of the year, due to an upturn in construction activity; however, higher than usual rainfall dampened demand in the second half.
Sales volumes for the ready-mixed concrete and aggregates businesses increased by 7% and 10%, respectively, in the year under review, while sales volumes for fly ash decreased by 17% from one year to the next.
Overall, the materials division’s revenue increased by 10% to R1.08 billion in the reporting year.
Although trading conditions remain difficult in Zimbabwe, due to the macroeconomic environment, it continues to trade ahead of expectations. During the year under review, PCP cement sales volumes in the country increased by 28% year-on-year.
PPC Zimbabwe’s revenue grew 34% year-on-year to R2.1 billion, driven by buoyant retail demand and support from government-funded projects.
Cement demand also rebounded strongly in Rwanda in the second half of the fiscal year as lockdown restrictions eased further in the country. According to PPC, retail demand, exports and government-funded projects are strong demand drivers in Rwanda.
Cement sales volumes in the country were up 20% year-on-year, while revenues increased 7% to R1.2 billion.
Meanwhile, PPC is making good progress in its decarbonization strategy as capital becomes available for investment. PPC aims to reduce its carbon emissions by 10%, or 76 kg/t of cementitious product, by FY2025.
The company aims to achieve this goal by reducing its clinker factor, increasing its use of alternative fuels and renewable energy, and improving equipment efficiency.
In the year under review, despite only launching its decarbonization strategy in November 2021, PPC has already reduced its clinker factor by 5% year-on-year and reduced its carbon emissions. carbon of approximately 8% of the cementitious product.
“As we execute the next phase of our strategy, we aim to strengthen our leadership position in our key markets, redouble our efforts to improve operational efficiency, optimize financial returns and accelerate decarbonization,” Van said. Wijnen.